Monthly Newsletter - September 2008

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Growing Links between Peru and Neighbouring Amazon Giant

Economic ties between Peru and Brazil are set to strengthen in the near future with commercial cooperation flourishing between the two countries. It has been suggested that trade exchange between the pair will increase by as much as 40 percent in the coming year, with bilateral trade set to expand to four billion dollars in 2009. This has risen dramatically from just 500 million dollars of exchange in 2001.

In mid September, Peruvian President Alan Garcia headed a delegation composed of over 200 business leaders along with three of his cabinet ministers to meet President Lula of Brazil in the ministerial offices of São Paolo. Amongst his chief objectives was to inaugurate “Expo Peru”, an event designed to promote commercial investment and business opportunities and the tourist industry of Peru. The event was underpinned by artistic exhibitions, displays of diverse Peruvian culture and a week long gastronomic festival.

The exposition follows increasing Brazilian interest in investment in the Peruvian economy, with significant deals being struck in mining, energy and manufacture sectors. Recent developments have included large investments by three Brazilian mining companies: Votorantim Metais, Vale and Gerdau; and a three billion dollar scheme drawn up by energy giants Petrobau is amongst future plans to develop the Peruvian economy in the next decade. Other possible projects include building hydroelectric dams along the Peru-Brazil border.

Alongside promoting internal investment in Peru, Garcia has been focusing on building a platform from which Brazilian exports can reach other parts of the world. Symbolically, he has invited President Lula to the APEC Summit in November, where Peru will host discussions between leaders of 21 Pacific Rim countries. With increasing investment, Brazilian companies would be able to take advantage of free trade agreements that are being formulated - and that already exist - between Peru and countries in Asia and North America, including Canada, Singapore, the United States, China and South Korea. One potential advantage would be that Brazilian ethanol companies could sell to markets in the United States which are currently restricted to them by high tariffs.

Such integration is far from being isolated in Latin America, and there has been a multiplying volume of regional trade and cooperation in recent years. This has, in part, been a result of the slump in the value of the US dollar, which has made it more profitable for countries to trade and exchange their own currencies, rather than exporting to the developed world. In unison, producers have been bolstered with funds earned from significant global price rises in certain commodities produced in the region.

With increased spending power and security, companies are beginning to look closer to home to find markets for export and investment, with geographical proximity and cultural affinity providing easier opportunities to exchange with other Latin Americans. Nevertheless, this process is progressing somewhat slower than is possible, and the potential remains to consolidate interregional markets, deepen trade ties and protect economic links from political instability. This will help to provide more jobs, reduce poverty and promote further development across the region.

by Simon Ross-Gill

Source:
ANDINA
The Economist
El Comercio
Latin Business Chronicle

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